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Facebook Settles Claims in Lawsuit Over ‘Sponsored Stories’

May 22 (Bloomberg) -- Facebook Inc. settled a lawsuit “in principle” over claims that it used information supplied by users of the social networking website to advertise products without consent.

The judge in the case was notified of the accord yesterday and it was memorialized today, according to a filing in federal court in San Jose, California. Terms of the agreement weren’t disclosed in the filing.

Facebook was accused in the complaint, which was moved last year to federal court from state court, of appropriating the names, photographs and identities of users to advertise products without their permission. The company’s “sponsored stories” were a “misleading advertising scheme” using material posted by Facebook members on their profile pages, according to the complaint.

When a user indicates a “like,” or uses the network’s “check-in” function or plays a game integrated with Facebook, the interaction can result in the member’s profile information “appearing as an endorsement in a paid advertisement,” according to the complaint.

Andrew Noyes, a spokesman for Menlo Park, California-based Facebook, declined to comment on the settlement.

Jonathan Davis, a lawyer with the San Francisco-based Arns Law Firm representing the plaintiffs, didn’t immediately return a call seeking comment.

The case is Fraley v. Facebook Inc., 11-cv-01726, U.S. District Court, Northern District of California (San Jose).

To contact the reporter on this story: Joel Rosenblatt in San Francisco at jrosenblatt@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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